Five Things to Look For in the Budget Speech

When Finance Minister Pranab Mukherjee speaks in Parliament later today, there’ll be a flood of numbers, intricate details on tax schemes and welfare policies, and lots of shouting and interruptions by opposition politicians. Amid all that confusion and chaos, here are some things to look out for in India’s next budget:

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Finance Minister Pranab Mukherjee will unveil the budget for the fiscal year from April 1 on Monday.

1. A Big FDI Reform: India’s Commerce Secretary told WSJ earlier this year that there is a growing consensus in government that multi-brand retail–the sector that includes supermarkets and department stores–should be opened up to foreign investment. Currently, none is allowed. Let’s see if Mr. Mukherjee makes any promises. A tepid approach would be to allow 26% foreign ownership, but that might not be enough to attract the big boys like Wal-Mart, Tesco and Carrefour, who would likely want to control any Indian venture they launch.

2. The Next Act in the Fiscal Drama: There will be much back-patting and high-fiving over the fact that the fiscal deficit narrowed from 6.3% to 4.8% in the last fiscal year. But that was in large part because the government brought in nearly $15 billion from a telecom 3G spectrum auction. Assuming there’s no such auction coming this year (we aren’t aware of one) can the government announce enough big-ticket “disinvestments”—sales of shares in public companies—to keep improving its books at this pace? That seems tough, but we’ll see if Mr. Mukherjee offers any clues.

3. Strategy for the Oil Price Conundrum: It’s almost inevitable that Mr. Mukherjee will have to discuss India’s strategy for dealing with the spike in international oil prices being driven by political upheaval in the Middle East. India is a huge importer of crude oil, and its bill has gone up as oil has crossed $100 per barrel. At what point will the government hike gasoline prices and accept the corresponding populist backlash? Theoretically, public sector gasoline marketers were given authority to raise prices when fuel deregulation was announced with much fanfare last year. Will they use those powers and pass on costs to consumers or let themselves sink into deep debt?

4. Tweaking of Big Welfare Schemes: The Congress Party-led government will likely give yet another hefty hike in funding to its flagship development programs like the NREGA rural work guarantee program. But will Mr. Mukherjee announce any measures to better track where money is going and how it is being spent to assuage critics who say some social spending has been wasteful? If he doesn’t address those issues, the government could start losing support for these programs and find it harder, eventually, to get big budget increases for them.

5. Clues on the Fighter Jet Deal: According to some people competing to sell India 126 multi-role fighter jets, there may be some clues in the defense budget as to whether India intends to close that deal–India’s biggest military purchase ever–this year, as some officials have been suggesting publicly. In general, look for a robust defense spending increase as India works through its shopping list for light utility helicopters, submarines, tanks, howitzers and other equipment.